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    mcclabg's Avatar
    mcclabg Posts: 2, Reputation: 1
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    #1

    Feb 21, 2008, 09:37 AM
    How to record a long-term liability?
    I have an interest-only loan to record on the balance sheet? What journal entry would capture this activity?

    DR?
    CR Long-term liability

    Thanks!
    mltsara's Avatar
    mltsara Posts: 7, Reputation: 1
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    #2

    Feb 21, 2008, 07:18 PM
    If it is a mortgage - Notes Payable... Bank... & Expense the interest each month
    morgaine300's Avatar
    morgaine300 Posts: 6,561, Reputation: 276
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    #3

    Feb 21, 2008, 07:50 PM
    If you're meaning how do you record the payment of the interest, the credit is to cash, not a liability.

    If you're accruing interest as an adjusting entry that hasn't been paid yet, then it goes to Interest payable, not notes payable. Interest is not a note.

    But you did say which it is.
    mcclabg's Avatar
    mcclabg Posts: 2, Reputation: 1
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    #4

    Feb 22, 2008, 08:19 AM
    Quote Originally Posted by mcclabg
    I have an interest-only loan to record on the balance sheet? What journal entry would capture this activity?

    DR ??
    CR Long-term liability

    Thanks!
    Credit Notes Payable but what's the debit?
    morgaine300's Avatar
    morgaine300 Posts: 6,561, Reputation: 276
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    #5

    Feb 22, 2008, 07:55 PM
    The interest expense, like mltsara said. She got that part right -- I was just correcting the note payable thing.
    Rebeccawaggoner's Avatar
    Rebeccawaggoner Posts: 1, Reputation: 1
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    #6

    Jul 11, 2013, 09:05 AM
    Even if the repayment plan is set up as interest only, isn't there still a principal amount that is due as a long-term liability perhaps? For example, what is being paid for? If the company was loaned money, then someone would record a debit to cash and credit to loan or note payable, probably a long-term liability.

    If the company bought equipment, then you would debit fixed assets and credit some sort of long-term liability.

    Then, as the interest only payments are made, there would be a debit to interest expense and credit to some payable account or cash-with no impact on the principal balance.

    Then, typically, a balloon payment (partial or in full) would typically be due on the principal balance at some point specified in the loan agreement.

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